Gold’s recent price volatility underscores uncertainty in global markets as traders react to geopolitical developments and end-of-year profit-taking. After a sharp 3.5% decline on Monday, following last week’s 20-month-high surge, gold prices hint at a near-term peak, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank. Yet, he says, the metal’s long-term outlook remains robust, driven by macroeconomic and geopolitical challenges.
Politics in action
This week’s gold market swings mirror political developments in the U.S., particularly President-elect Donald Trump’s key nominations and policy announcements. Prices dropped following Trump’s choice of Scott Bessent, a seasoned financial leader, as Treasury Secretary. However, volatility spiked again after Trump proposed sweeping tariffs, including 25% on Canada and Mexico and 10% on all imports from China, alongside his nomination of Jamieson Greer as U.S. Trade Representative. Greer’s advocacy for strategic decoupling from China signals a potentially turbulent trade landscape.
Santa rally could be coming?
Gold has experienced a stellar 28.3% gain this year, approaching record annual performances from 2007 and 2010. After reaching an all-time high of $2,658 per ounce in October, prices have corrected by $253. Traders may now use market rallies to reduce long positions ahead of year-end. Hansen notes the potential for another "Santa rally" in December, as lower prices offer a more attractive entry point.
Longer term factors apply pressure
Despite near-term corrections, Hansen maintains a bullish outlook for gold and silver into 2025. Key factors include:
- Central Bank Buying: Diversification away from the U.S. dollar and government bonds.
- Interest Rate Cuts: Making gold more competitive against low-yielding government bonds.
- Safe-Haven Demand: Continued geopolitical tensions, including conflicts in the Middle East and Eastern Europe, as well as trade war risks.
- Chinese Investment: Amid concerns over property markets and low savings rates.
- Fiscal Instability: The potential inflationary impact of Trump’s high-cost policies on tariffs, tax cuts, and deportation.
Silver Faces Challenges Below $30
Silver’s impressive 47% rally earlier this year, peaking at a 12-year high in October, has retraced sharply. Support has been identified around $29.70, with additional downside risks tied to weaker performance in gold and copper markets.
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